As the financial crisis deepens, cities and states across the country are struggling with the question of raising taxes. Both Gov. Rendell and Mayor Michael Nutter have declined to raise taxes, but that is not the trend in municipalities across the nation. Below are several excerpts from news reports across the country on taxes.
This is tax-rate-setting season, and each day, the Department of Revenue's Division of Local Services approves a flurry of new rates set by cities and towns after reviewing their assessments, budgets, and revenue projections. With few exceptions, the numbers tell the same story in community after community: Home values went down, but taxes, and tax rates, on the new bills are going up.
In Stoughton, for example, the average single-family home assessment fell 8.6 percent, but the average single-family tax bill is rising $100. In Reading, the average house shed almost 2 percent of its assessed value, but the average tax bill is up $162. And in Natick, where an override passed in the spring, the average single-family assessment dropped 2.4 percent, but average tax bill is rising $394.
Two tax committees will meet today, and House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said legislative leaders will take recommendations on how to address the cuts. Representatives from as many as 40 Minnesota cities plan on attending the committee hearings today to make their concerns known.
Pawlenty and the legislative leaders also addressed plans for dealing with the larger projected deficit for 2010-11. He reiterated that he would be focusing on making cuts in spending as opposed to raising taxes. While agreeing that cuts would come first, Kelliher said she would not rule out reconfiguring tax policies, including potentially broadening the state's sales tax to include such things as clothing and Internet sales.
As Governor Arnold Schwarzenegger’s office now says the state faces a $14.8 billion deficit for the 2008-09 fiscal year and a possible $41.8 billion in the next 18 months, Democrats and Republicans in the state Legislature have been unable to resolve a debate over whether increased taxes should be a part of the solution.
Whatever combination of spending cuts and new taxes ends up in the final budget, it will have an impact on local governments, said California Legislative Analyst’s Office principal fiscal analyst Marianne O’Malley.
I’m not in favor of taxing our way out of this,” state Rep. Phil Montgomery, a Democrat from Wisconsin, said following Wyss’ remarks.
But Wyss said states may have no other choice as the recession drags into next year. Already, 43 states are coping with budget shortfalls as the nation faces rising unemployment and a global credit crisis. If credit markets stay locked up, oil prices fluctuate and home values keep declining, “this could turn into the deepest recession since World War II,” Wyss said.
“It’s going to be a tough, tough couple of years to get through [for states] because revenues are going to be really lousy,” Wyss said.
What do you think? Should Philadelphia and Pennsylvania raise taxes to deal with the budget crisis? Sound off in the comments!